Monday, October 24, 2016

Corporate Bond Market

US Equity Futures are strong to start the week with the DJ Futures +75 and the S&P Futures +9. The global tone is positive with overseas equities trading up through the overnight. Oil is down, last at $50.16/ barrel and rates are weaker with the 10yr Treasury last at 1.737%. Credit is firm with the Invest Grade Index showing 65.9/66.6 and cash is also tighter.

In credit news, October’s primary market has priced $105.655bn in Investment Grade and $6.47bn in High Yield Credit. Today is expected to be a heavy day in new issue with deals from: BNY Mellon, Wells Fargo, Netflix, Honeywell, United Rentals, and Jordan already on the calendar for today’s business.

In economic data, there are two announcements scheduled for today. First, the Chicago Fed National Activity Index fell below estimates for September. Following, Markit US Manufacturing PMI will be reported later this morning (estimates match last month’s tally of 51.5).

Municipal Bond Market

Munis are stronger this morning after firming up on Friday.  We are starting to see buyers return to the market after sitting on the sidelines for most of October.  We are seeing the most follow through in the primary with deals starting to come oversubscribed again.  With such a large calendar the secondary should continue to take a back seat to the primary this week.  At this point it seems there are still a lack of liquidity on BWs which should also persist during the week ahead.  Supply is significantly stronger this morning with $20bln on tap over the next 30 days versus $13bln on Friday.
PR trading has picked up over the past few weeks with buyers returning to the market after the GO vs. COFINA law suit.  Volume in GOs was extremely light before the lawsuit and we have seen buyers step back into the credit.   Demand remains strong for senior lien PRASA and COFINA paper, along with all insured credits.  PR 8’s continue to drift higher with bonds trading around $67F Friday.

30 Day visible supply: 20bln

Friday, October 21, 2016 15:

Final MMD read (5% coupon)

2017-2046:

unchanged

       tsy 10yr 1.738%